Canada Throne Speech Comes Amid Shaky Economic Footing

A view of Parliament Hill, in Ottawa. Prime Minister Stephen Harper will outline his government’s agenda Wednesday in the Speech from the Throne.

By Paul Vieira

Canada’s 2015 election campaign unofficially kicks off Wednesday with the speech from the throne, giving Prime Minister Stephen Harper a chance to reinforce his government’s image as having a steady hand on the economic-policy lever, overseeing growth and job creation in one of the stronger economies in the developed world.

But statistics and sentiment in Canada suggest it’s a shaky, not steady, economy on the homefront.

Mr. Harper’s government returns to Parliament this week knowing Canadian businesses are hesitant to hire and invest over the next year on concerns over the global economy and what they deem as “persistent” weakness in the domestic economy, according to a Bank of Canada poll released last Friday. Canadian policymakers, led by Finance Minister Jim Flaherty, had hoped business investment would help drive growth as indebted households curb consumer spending. But the central bank poll suggested plans to boost capital spending are at their lowest level since 2009.

Capital Economics said the poll “supports our general view that policymakers might eventually have to provide more policy stimulus to support a flagging economy.” The forecasting firm, which tends to have a bearish outlook on Canada, has long argued the country’s central bank might have to drop its bias toward raising rates.

On the jobs front, the government has boasted that employment in Canada has swelled by 590,000 over its pre-recession peak. But analysts say the latest employment data — which saw the creation of 11,900 net new jobs in September and the jobless rate dip below 7% for the first time since 2008 — mask underlying weakness in Canada’s labor market, as job creation isn’t keeping up with population growth and discouraged workers, particularly the young, are dropping out of the labor force.

Christopher Ragan, economics professor at Montreal’s McGill University, cites the employment rate — or the number of people employed as a percentage of the Canadian population — as a sign of significant slack in the labor market. The employment rate declined in September to 61.8%, well below the pre-recession peak of 63.8%, and the 62.6% level in February 2006, or when Mr. Harper first took office. The professor said the consequence is that a larger number of Canadians are unemployed for longer, and that poses a risk of skill degradation among the country’s workforce.

“The government has to recognize that slow growth isn’t costless, and they need think about how to deal with it,” Mr. Ragan said.

A spokesman for Mr. Harper said Canada is “not immune” to the economic challenges from abroad, adding that’s why the government is working to implement tax breaks to help small business and manufacturers, and setting aside cash for skills training.

Still, political watchers don’t expect the uninspiring data to stop Mr. Harper from focusing on his government’s economic bona fides, as pollsters indicate recent surveys suggest the economy is the one area where the Conservatives and the Prime Minister top their political rivals.

The throne speech, which officially opens the new session of Parliament, is scheduled to be delivered around 4:30 p.m. EDT Wednesday.

About Canada Real Time

Canada Real Time provides insight and analysis into what’s making news in Canada, a country punching above its weight on the world stage thanks to its vast resources and strong banking sector. Drawing on the expertise of The Wall Street Journal and Dow Jones Newswires, we take a look at developments in fields ranging from business to politics to culture. You can contact the editors at canadaeditors@dowjones.com